Pandora Says High Royalty Rates Are Putting Them Out of Business

August 18, 2008 10:59 AM ET

Web radio giant (and music recommendation service) Pandora is on the verge of shutting down due to high royalty fees, says the company's founder. Despite a million daily listeners and an iPhone application that attracts roughly 40,000 new customers a day, Pandora's founder says, "We're approaching a pull-the-plug kind of decision. This is like a last stand for webcasting." The cause of death may be a decision made last year by a federal panel that doubled the per-song performance royalty of tracks played on Internet radio stations. "I was on the bus when I get this message on my Treo," Westergren tells the Washington Post. "I thought, 'We're dead.' " Pandora stands to lose 70 percent of its $25 million revenue in royalty fees. Negotiations are underway between Webcasters and SoundExchange, a company that represents artists and record companies, to lower the fees. By comparison, traditional radio stations don't pay any royalties, while satellite radio stations face a much smaller fee. On June 26th, 2007, thousands of Internet radio stations went silent to protest the higher fees.

Related Stories:
Public Outcry Staves Off Destruction of Internet Radio
Internet Radio's Day of Silence
Pandora Radio Leads The Best New Music-Related iPhone Apps

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Song Stories

“Money For Nothing”

Dire Straits | 1984

Mark Knopfler wrote this song with Sting, and it wasn’t without controversy. The Dire Straits frontman's original lyric used the word “faggot” to describe a singer who got their “money for nothing and their chicks for free.” Even though the slur was edited out in many versions, the band, and Knopfler, still took plenty of criticism for the term. “I got an objection from the editor of a gay newspaper in London--he actually said it was below the belt,” Knopfler told Rolling Stone. Still, "Money For Nothing," undoubtedly augmented by its innovative early computer-animated video, stayed at Number One for three weeks.

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